The United States filed a complaint under the False Claims Act against Mallinckrodt ARD LLC, formerly known as Mallinckrodt ARD Incorporated and previously Questcor Pharmaceuticals Incorporated, in the U.S. District Court for the Eastern District of Pennsylvania, the Department of Justice said Wednesday.

The government alleges that Mallinckrodt and Questcor (collectively Mallinckrodt) engaged in conduct that violated the False Claims Act by using a foundation as a conduit to pay kickbacks in connection with its drug H.P. Acthar Gel (Acthar) from 2010 through 2014. 

When a Medicare beneficiary obtains a prescription drug covered by Medicare, the beneficiary may be required to make a partial payment, which may take the form of a copayment, coinsurance, or a deductible (collectively “copays”). Congress included copay requirements in the Medicare program, in part, to serve as a check on health care costs, including the prices that pharmaceutical manufacturers can demand for their drugs. The Federal Anti-Kickback Statute prohibits a pharmaceutical company from offering or paying, directly or indirectly, any remuneration—which includes money or any other thing of value—to induce Medicare patients to purchase the company’s drugs. This prohibition extends to the payment of patients’ copay obligations. 

The government alleges that Mallinckrodt used a foundation as a conduit to pay illegal kickbacks in the form of copay subsidies for Acthar so it could market the drug as “free” to doctors and patients while increasing its price. Mallinckrodt allegedly paid these illegal subsidies through three funds that Mallinckrodt had a foundation set up to pay Acthar Medicare copays to the exclusion of other drugs. The government alleges that Mallinckrodt then routed patients with Acthar prescriptions to these funds. Mallinckrodt allegedly made continuing payments as the sole “donor” to these funds, to keep subsidizing Acthar Medicare copays as it expanded its sales of the drug. The government alleges that the Company paid these subsidies to induce Medicare-reimbursed purchases of Acthar at its ever-increasing price, and used the subsidies to counteract doctor and patient concerns about the drug’s high cost and to market the drug as “free.” The government further alleges that since its acquisition of Acthar in 2001, Mallinckrodt had raised its price from approximately $50 to over $32,200 per 5 milliliter vial by the end of 2014.    

“Illegal inducements increase the costs paid by the American taxpayer and distort the market forces that otherwise could control those costs,” said Assistant Attorney General Jody Hunt of the Department of Justice’s Civil Division. “This lawsuit and prior enforcement actions, according to, make clear that the Department will hold accountable drug companies that pay illegal kickbacks to facilitate increased drug prices.” 

“Medicare Part D is an important program that our nation instituted to help seniors cover prescription drug costs, and Congress enacted safeguards to ensure Part D’s fiscal viability for those citizens,” said United States Attorney William McSwain. “In my office’s continued commitment to fighting health care fraud, we will not allow drug companies to use so-called charitable patient assistance funds to do what they otherwise cannot do – pay patients’ co-pays to circumvent these safeguards and increase their profits.”

“Medicare rules are designed to protect beneficiaries and taxpayer dollars,” said Maureen Dixon, Special Agent in Charge of the Philadelphia Regional Office of the Inspector General, Department of Health and Human Services. “HHS-OIG and the U.S. Attorney’s Office will continue to work together to fight health care fraud and investigate allegations of co-pay and kickback violations.”

The allegations that are the subject of the government’s complaint were originally brought in two cases filed under the whistleblower, or qui tam, provision of the False Claims Act. The act permits private parties to sue for fraud on behalf of the United States and to share in any recovery. The act also permits the government to intervene in such actions, as the government previously did in the two whistleblower cases here, which are captioned United States of America ex rel. Strunck et al. v. Mallinckrodt ARD, Inc., No. 12-CV-0175 (E.D. Pa.), and United States of America ex rel. Clark v. Questor Pharmaceuticals, Inc., No. 13-CV-1776 (E.D. Pa.).